Another article on the alarming decline of start-ups in the U.S., the rise of innovation in China, and the unfortunate self-inflicted degradation of the U.S. patent system’s ability to support innovative new companies. The U.S. patent system is now tied for 10th place in the world, with Hungary. As the author of the below article points out, the U.S. should stop worrying about China, and start worrying about improving the environment for start-ups in the U.S.

The URL below points to an important opinion piece by James Glassman on the importance of the patent system to start ups, and why it needs to be fixed as a top economic priority. All the tax cuts in the world are not going to help jump start accelerated job growth if our entrepreneurs can’t afford to protect their innovations, which is a sad reality of today’s patent system.

In this case, the Federal Circuit found the claims were directed to an abstract idea, stating that the claims in issue “are not directed to a new type of bankcard, turnstile, or database, nor do the claims provide a method for processing data that improves existing technological processes.” Rather, the court found the claims are directed to the collection, storage, and recognition of data, which constitutes an abstract idea.

Claim 14, which the court determined was representative, recites:

A method for validating entry into a first transit system using a bankcard terminal, the method comprising:

downloading, from a processing system associated with a set of transit systems including the first transit system, a set of bankcard records comprising, for each bankcard record in the set, an identifier of a bankcard previously registered with the processing system, and wherein the set of bankcard records identifies bankcards from a plurality of issuers;

receiving, from a bankcard reader, bankcard data comprising data from a bankcard currently presented by a holder of the bankcard, wherein the bankcard comprises one of a credit card and a debit card;

determining an identifier based on at least part of the bankcard data from the currently presented bankcard;

determining whether the currently presented bankcard is contained in the set of bankcard records;

verifying the currently presented bankcard with a bankcard verification system, if the bankcard was not contained in the set of bankcard records; and

denying access, if the act of verifying the currently presented bankcard with the bankcard verification system results in a determination of an invalid bankcard.

Arguably, the first two steps are passively receiving data. The third step is arguably so high-level that it could be deemed abstract under various theories (e.g., mental steps, humanly performable with pen and paper, conventional computer, or well-known economic activity). The fourth step could arguably be cast as a yes/no decision that falls into abstractness on similar grounds. The fifth and sixth steps are more active, but are recited at such a high-level as to sound non-technical. Had these claims been presented from the perspective of explicitly reading a bankcard using a on-site device, and controlling physical access to a transit system, through for example a turnstile, it is less likely that the claims would have been dismissed as claiming an abstract idea.

On the other hand, it would be much preferred if inventions such as this, that provide a very practical solution to a big technical problem, did not have to meet a standard of utility and eligibility that exceeds other technologies.

Thanks to Joe Wang of Schwegman, Lundberg & Woessner, P.A., for this analysis.

Interesting NY Times story about the reduced number of start-ups possibly being a drag on economic growth, or put another way, the lower number of start-ups corresponds to lower economic growth rates. Here is link to story: https://www.nytimes.com/2017/09/20/business/economy/startup-business.html?smid=tw-share

What I find interesting is that just a few years ago, patent academics in the US (some of which admit to being funded by a large US tech company) were blaming trolls for inhibiting start-up activity, and hobbling economic growth for giant mega-corporations. The NY Times article suggests a very different reason for that: large corporates have so much market power it is difficult for start-ups to get enough oxygen to survive. Of course, a start-up with a successful product can at least get a measure of countervailing market power from its patent portfolio. That is, if it can get past Section 101 subject matter eligibility challenges, and avoid having its patents thrown into daisy-chained IPR challenges. Its understanding that we needed a solution to trolls, but it should not come at the expense of start-ups activity, without which our tech industry cannot thrive.

The PTAB shows us a little glimmer of the return of sanity to Section 101, with this decision that finds a claim to a credit card transaction verification algorithm patentable. See Ex parte PATRICK FAITH and AYMAN HAMMAD

Here is one of the claims found 101 compliant:

9. A method for conducting a transaction, comprising:

generating, by a portable consumer device, a verification value in response to a transaction involving an access device;

sending, by the portable consumer device, the verification value and a portion of a first dynamic data element to the access device, the portion of the first dynamic data element including data included in a fixed position of the first dynamic data element, the verification value being different from the portion of the first dynamic data element; and

communicating, by the access device, the verification value and the portion of the first dynamic data element to a service provider computer;

wherein the service provider computer determines a plurality of candidate dynamic data elements using the portion of the first dynamic data element in response to determining that the verification value does not match a second verification value independently generated by the service provider computer, determines a plurality of candidate verification values from the plurality of candidate dynamic data elements, and determines whether the verification value matches any of the plurality of candidate verification values;

wherein, each of the plurality of candidate verification values is unique to a corresponding candidate dynamic data element of the plurality of candidate dynamic data elements; and

wherein the transaction is thereafter authenticated when the verification value matches any of the plurality of candidate verification values.

In a telling article recently published in IP Watchdog, Russell Slifer, former Deputy Under Secretary of Commerce for Intellectual Property & Deputy Director of the United States Patent and Trademark Office, and a Principal at Schwegman Lundberg & Woessner, asserts that a combination of court decisions and legislation has unnecessarily moved the U.S. into the anti-patent territory. Below is the link to the article on IP Watchdog:

The court denied defendant’s motion to dismiss on the ground that plaintiff’s network gaming patents encompassed unpatentable subject matter because the asserted claims were not directed toward an abstract idea. “Prior communication techniques interconnected all participants using point-to-point connections, and thus, did not ‘scale well’ as the number of participants grew. The Broadcast Claims are directed to an innovative network structure for the distribution of data as the number of participants in a computer network is scaled. . . . A non-complete, m-regular network is a network where each node is connected to the same number of other nodes, or ‘m’ number of other nodes, and where each node is not connected to all other nodes. . . . Defendants argue that the Broadcast Claims are analogous to situations such as the schoolyard game of ‘telephone’. . . . Defendants’ analogies do not present the same communication scaling issues as those that arise in computer networks. Defendants gloss over the claim requirement of a non-complete, m-regular network that is implemented on an application level. The claims require a specific and apparently innovative structure of message-forwarding, which none of Defendants’ analogies are known to employ.”

In this case, Ex parte MARK L. MORSCH, MICHAEL A. LANDIS, and BLAIR C. JENNINGS, Appeal 2016-0031711, the PTAB determined that a software innovation for “visualizing documentation and medical coding of a medical procedure” was statutory subject matter under Section 101, finding that “the Examiner has not shown adequately that the invocation of a natural language processing computer program to use a selected image area to create text, that is then used to determine a spatial path within the body of a patient, does not represent “significantly more” than the abstract idea the Examiner determined the claim is directed to.” In some sense the invention is directed to what may be deemed artificial intelligence, so it is an encouraging line of thinking by the USPTO, as it would be easy under Alice to label these types of inventions as nothing more than abstract ideas processed using a generic computing system. Here, it seems the PTAB hung their hat on the natural language processing as being a “specific” type of computing device, vs. a “generic” one. So, the implication seems to be that any claim to a natural language processing invention would likely be statutory, if considered by this panel.

Here is the claim, and an excerpt from the opinion.

2. A computer implemented method comprising:

providing an anatomical diagram associated with a medical procedure, wherein the anatomical diagram includes a plurality of user selectable areas;

receiving a user selection indicative of two or more user selectable areas of the plurality of user selectable areas on the anatomical diagram at a computer processor;

if the two or more user selectable areas include a first user selectable area: using a natural language processing computer program to generate a first free text description of the received user selection;

if the two or more user selectable areas do not include the first user selectable area: using the natural language processing computer program to generate a second free text description of the received user selection;

using the first or second free text description to generate a procedural route for the medical procedure using the computer processor, the procedural route representing an anatomical path within a body of a patient; and

displaying on an electronic display the procedural route representing the anatomical path within the body of the patient on the anatomical diagram.

From the opinion:

Setting aside the use of computerized tools, we agree with the Examiner that the method is directed to an abstract idea, which the Examiner articulates as “a method of processing a user’s selection on an anatomical image,” which is a “method of organizing human activities.” Final Act. 3.

A physician commonly views an x-ray, or other medical image of anatomy, and plots a course for an invasive procedure, such as the introduction of a catheter to the vascular system of a person, using the imagery and mental thought, guided by extensive education and experience, to select the path to be used for the procedure. To the extent that the path guides the medical procedure, it is a method to organize human activities related to the procedure.

We disagree with the Examiner’s conclusion on the second step of the Alice analysis, however, which requires that we assess whether the additional elements transform the nature of the claim into a patent-eligible application of the abstract idea. Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134
S.Ct. 2347, 2355 (2014). This is a search for an “inventive concept”—an element or combination of elements sufficient to ensure that the claim amounts to “significantly more” than the abstract idea itself. Id. Independent claim 2 recites “using a natural language processing computer program to generate a first free text description of the received user selection.” The Examiner finds the method is “deployed on generic hardware” (Final Act. 3) and “the computer appears to perform only generic functionality that is well known in the art, e.g. processing data” (Answer 6).

The Specification, however, refers to “natural language processing (NLP) engine 120,” and that “the NLP engine 120 can be substantially as
described in US Patent 6,915,254 entitled ‘Automatically Assigning Medical Codes Using Natural Language Processing’ [hereinafter “the ’254 patent”], the entire contents of which are incorporated by reference.” Spec. 126. Portions of the ’254 patent describe that a “natural language processor” is used “to code diagnoses, procedures, and evaluation and management (EM) level” from physician notes. ’254 patent, 3:34—37. The Specification further describes the following: The NLP engine 120 assigns medical codes from a narrative text document (medical documentations or patient record) associated with a surgical procedure. The NLP engine 120 is designed to recognize, extract, and codify surgical
procedures (e.g., catheterization procedures, including the specific catheter route) by accessing the database of vascular anatomy data 142.

Given the above disclosures, the Examiner has not shown adequately, either through evidence or analysis, that the reliance on natural language processing capability, to generate text from a selection of an area in an image, as claimed, involves a general purpose computer performing well known generic functionality, rather than being a “particular machine” that is the result of implementing specific, non-generic computer functions. See Bilski v. Kappos, 561 U.S. 593, 601 (2010).

In addition, although a physician may view medical imagery and determine a “procedural route representing the anatomical path within the
body of the patient,” as claimed, the Examiner does not establish sufficiently that this method of organizing the human activity of the procedure involves first converting a selected area of anatomy image to text, and then converting text to a path, as claimed. For these reasons, the Examiner has not shown adequately that the invocation of a natural language processing computer program to use a selected image area to create text, that is then used to determine a spatial path within the body of a patient, does not represent “significantly more” than the abstract idea the Examiner
determined the claim is directed to.

Twenty years ago this September, Amazon filed for a patent on its new “1-click” on-line ordering idea. Now, its about to expire. See http://www.patentbuddy.com/Patent/US-5960411-A?ft=true.

For those of you that were not around when it issued, or the several years following, there was quite a lot of complaining about how unfair it was for Amazon to get this patent, and how it represented how bad patents are for software. Jeff Bezos himself even, for a time, was promoting a shorter term for software patents, in response in part to the criticism he received for the 1-click patent. Of course, now all the doomsday predictions look silly, with the e-commerce revolution having quite handily survived Amazon’s 1-click patent. Twenty years go by awful fast, we find out, as it seems like yesterday that the 1-click patent was issued.

One thing that has always fascinated me is that people can get incredibly upset, if a novel invention, that has been absent from civilization for thousands of years, is kept proprietary to an inventor for a mere additional twenty years, before it can be freely exploited by all. Did it really hurt competitors of Amazon to have to wait twenty years to offer 1-click ordering? If it did, we should see all of Amazon’s competitors make some big e-commerce gains in the next few years, as they deploy 1-click ordering to their heart’s content. But I suspect that won’t be the case.